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From: Matthews Asia <info@matthewsasia.com>
Date: 23 March, 2012 8:31:07 AM PDT
To: <computerdiy@yahoo.com>
Subject: Weekly Asia Update: Eye on Myanmar
Weekly Asia Update
March 23, 2012
Myanmar's rich landscape of temples draws tourists.
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Eye on Myanmar
Since the U.S. declared that the Asia-Pacific region is America's new priority, its strategic moves in Southeast Asia have included the notable visit to Myanmar in December by U.S. Secretary of State Hillary Clinton. The visit was generally viewed as an endorsement of the reform processes that Myanmar has slowly begun to roll out over the past year or so. On my recent trip there, I was able to take a first-hand look at some of these developments.
Myanmar's verdant and tropical capital city of Yangon struck me as having a calm and pleasing atmosphere. The air held a bit of a haze, however, as many residents may require wood-burning fires for cooking due to a lack of sufficient electricity or gas. There's also a dated quality to the city that one might expect from a country long isolated, both diplomatically and economically, from the West due to the actions of its former military junta. The vehicles traversing Yangon's very bumpy roads are at least several decades old (and mostly imported from Japan, China and other Asian automakers) and infrastructure is sorely lacking. Rolling power blackouts occur at least two or three times a day for many people. However, some businesses, like the hotel I stayed in, maintain their own diesel generators for consistency.
As Myanmar's hotel rooms are still limited, hotel rates have doubled over the past few months and are still on the rise along with tourism. The country boasts numerous beautiful temples and stunning beaches. There is also much buzz over prospects for the entrance of international hotel chains, new serviced apartments and condominiums. Already, land prices in Yangon have shot up, with some parcels in the city center, surprisingly, rivaling that of New York City. Yangon's property market is expected to stay strong as plans for infrastructure development promise to boost the market. Since foreigners are not legally able to buy land, the surge in interest from businessmen and investors from Vietnam, Thailand, China, Singapore and Malaysia should also stimulate Yangon's rental market. Judging by Myanmar's modern (yet still under-utilized) airport, the country seems ready for the influx of attention from abroad.
What struck me the most during my visit was the character of the locals, who largely refer to themselves as Burmese. From hotel and restaurant servers to local businessmen I met, the people had a notably warm and easy manner. What's more, the predominantly Buddhist population is skilled and well-educated. Myanmar has a literacy rate of about 92%, higher than other frontier markets like Laos or Cambodia. In several separate conversations during my trip, locals suggested an increasing number of overseas Burmese are considering repatriating in Myanmar as more opportunities arise. Moreover, it seems local entrepreneurs are ramping up to take advantage of potential growth opportunities even ahead of the promise of foreign investment. During my visit, I met with one conglomerate whose wide operational reach includes the gem mining, retail banking and airline industries. The firm is already expressing the drive to seek international partners in developing local property and leisure operations. If more and more local companies seek to raise capital abroad for their expansion opportunities, this could allow equity investors to directly participate in the country's growing economy.
Despite the foreign interest, however, many challenges still face the country. First and foremost, it needs to demonstrate political and financial stability. Currently, Myanmar has no local stock exchange and its complex and confusing foreign-exchange regime also requires a major overhaul.
Fortunately, International Monetary Fund authorities are already reviewing ways to help unify the country's foreign exchange system and lift restrictions on international transactions. Many in the region see Myanmar as a potentially attractive investment alternative to Thailand. In addition, Myanmar's reforms should benefit the region. For example, Thailand already supplies a significant portion of Myanmar's cement needs, and we expect this demand to grow as Myanmar's infrastructure develops.
Myanmar has abundant reserves of oil and gas and many global resource companies already have a presence in the country, which is also a big exporter of gems such as jade, rubies and sapphires. The government's new spirit of openness and cooperation is encouraging and we will continue to monitor the impact of these measures.
Xin Jiang
Senior Research Analyst
Matthews International Capital Management, LLC
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